Financial Exploitation of the Elderly: Impact on Medicaid Eligibility

1. Financial Exploitation Of The Elderly:Impact On Medicaid EligibilityPresented by Donald D. Vanarelli, Esq. Certified Elder Law AttorneyNJ “Super Lawyer” in Elder Law and Estate Planningwww.dvanarelli.com

2. Methods of Entrusting Finances to a Third-Party: • Power of Attorney • Informally “handing over the checkbook” to a relative or a trusted friend.

3. Issues Clouding Liability: • Family relationships • Trust between the victim and the abuser • Ambiguities in powers of attorney or other instruments controlling the fiduciary’s authority • Varying levels of competency of the victim.

4. Added dilemma: When a third party makes improper and unauthorized transfers of the elder’s property without the elder’s knowledge or consent, will those improper transfers negatively affect the elder’s eligibility for Medicaid?

5. The Medicaid Program Joint federal and state program providing funding for long-term care to those aged, blind and disabled individuals who qualify financially. 42 U.S.C. §1396 etseq.

6. The “Look-Back Period” Under the Deficit Reduction Act of 2005: 60-month “look-back period” to analyze asset transfers by the applicant.

7. The “Penalty Period” A Medicaid applicant disposing of assets for less than fair market value within the “look-back” period may be subject to a period of Medicaid ineligibility. 42 U.S.C. §1396(p)

8. Resource Transfer Rules • 42 C.F.R. §410.1201: • (a) Resources; defined. ... [R]esources means cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance. • (1) If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse). • ****

9. Resource Transfer Rules (cont’d) 20 C.F.R. §416.1246(e): Transfer of a resource for less than fair market value is presumed to have been made for the purpose of establishing ... Medicaid eligibility unless the individual ... provides convincing evidence that the resource was transferred exclusively for some other reason.

10. State Medicaid Plan: “Available” Resources A state’s Medicaid plan must include “reasonable standards ... for determining eligibility ... which provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant...” 42 U.S.C. §1396a(a)(17)(B)

11. State of Medicaid Regulations Provide further guidance for the analysis of unauthorized transfers.

12. State Medicaid Regulations: Example (New Jersey) “In order to be considered in the determination of eligibility, a resource must be ‘available.’” A resource is “available” if the applicant has “the right, authority, or power to liquidate” the resources. N.J.A.C. 10:71-4.1

13. State Medicaid Regulations: Example (New Jersey) Among the categories of “excludable resources”: The value of resources which are not accessible to an individual through no fault of his or her own. N.J.A.C. 10:71-4.4(b)(6)

14. State Medicaid Regulations: Example (New Jersey) Examples of such inaccessible resources include real property that cannot be sold “because of the refusal of a co-owner to liquidate.” N.J.A.C. 10:71-4.4(b)(6)

15. Advocacy Tip: Pay particular attention to your state’s Medicaid regulations. In states with regulations similar to the New Jersey example, misappropriated assets are “not accessible ... through no fault of [the applicant’s] own.”

16. Advocacy Tip: Rebut the presumption that the resources were transferred to establish Medicaid eligibility. See 20 C.F.R. §416.1246(e); N.J.A.C. 10:71-4.7.

17. The Hardship Exception States may make determinations that the denial of Medicaid eligibility “would work an undue hardship….” 42 U.S.C. §1396p(c)(2)(D)

18. The Hardship Exception: HCFA 64 “When application of the transfer of assets provisions … would work an undue hardship, those provisions do not apply….”

19. The Hardship Exception: HCFA 64 (cont’d) Undue hardship exists when transfer penalties “would deprive the individual of medical care such that his/her health or his/her life would be endangered. Undue hardship also exists when application of the transfer of assets provisions would deprive the individual of food, clothing, shelter, or other necessities of life.”

20. State Hardship Regulations: Example (New Jersey) “...an applicant may apply for an exception to the transfer of asset penalty if he or she can show that the penalty will cause an undue hardship to him or herself.” N.J.A.C. 10:71-4.10(q)

21. State Hardship Regulations: Example (New Jersey) Undue hardship exists if Medicaid penalty would deprive the individual of “medical care such that his or her health or his or her life would be endangered,” or “food, clothing, shelter, or other necessities of life.” N.J.A.C. 10:71-4.10(q)

22. State Hardship Regulations: Example (New Jersey) Applicant must show that, the transferred assets are beyond his or her control and that the assets cannot be recovered. The applicant/beneficiary shall demonstrate that he or she has made good faith efforts, including exhaustion of remedies available at law or in equity, to recover the assets transferred. N.J.A.C. 10:71-4.10(q)

23. Advocacy Tip: It may be necessary to pursue litigation to recover the transferred assets, in order to comply with hardship requirements.

24. Obstacles To Enforcing Elder’s Rights: 1. Competency Issues The competency of the victim may affect issues such as the promptness of the discovery of wrongdoing, or the victim’s “right, authority or power” over the assets in question. See 20 C.F.R. §416.1201

25. Advocacy Tip If the competency of the victim is compromised, address this issue fully to ease Medicaid’s (or the court’s) reluctance to give proper weight to the issue.

26. Case Law: Competency Issues Davis v. Monahan, 832 So. 2d 708 (Fla. 2002): Court refused to apply delayed discovery doctrine to permit elderly woman with dementia to sue family members for misappropriation of assets.

27. Case Law: Competency Issues (cont’d) Chalmers v. Shalala, 23 F.3d 752 (3d Cir. 1994): Court rejected schizophrenic SSI recipient’s claim that, despite her “right” to liquidate interest in property partnership, her disability rendered her without the “power” to do so.

28. Case Law: Competency Issues (cont’d) Chalmers v. Shalala, 23 F.3d 752 (3d Cir. 1994): “although we are sympathetic to [the recipient’s] disability, the record does not establish unequivocally that she cannot effectuate her legal rights.... [she] had been represented by an attorney at each stage of these proceedings and ... signed the partnership agreement [in issue].

29. Case Law: Competency Issues (cont’d) I.L. v. DMAHS, 389 N.J. Super. 354 (App. Div. 2006): when an individual is incapacitated and does not have a guardian in place, the individual’s assets may be “unavailable” because they are not accessible to the individual “through no fault of his or her own.”

30. Case Law: Competency Issues (cont’d) Bernau v. State, 891 So. 2d 1229 (Fla. App. 2d Dist. 2005): Court “reluctantly reversed” conviction of son for financially exploiting his elderly parents, noting that, despite the parents’ declining mental status, the State had offered no evidence that they were incompetent.

31. Obstacles To Enforcing Elder’s Rights 2. Whether Actions Were “Authorized” State v. Kennedy, 61 N.J. 509 (1972): explores the issue of “legally authorized” transfers, and assists in interpreting Medicaid Communication No. 88-15.

32. State v. Kennedy, 61 N.J. 509 (1972) (cont’d): “A power of attorney of course is not an instrument of gift. In itself, it is no more than the term, power of attorney, imports--an authorization to the attorney to act for the principal.... In short, the instrument was the means whereby the agent was able to get his hands on the moneys, but when the moneys were thus obtained, the agent received them as agent for the principal, and the fraudulent appropriation of the moneys thus obtained to his own use constituted embezzlement.”

33. State v. Kennedy, 61 N.J. 509 (1972) (cont’d): Court affirmed embezzlement conviction of defendant, who used power of attorney to misappropriate elder’s assets.

34. State v. Kennedy, 61 N.J. 509 (1972) (cont’d): “[I]t is no defense to embezzlement that the moneys reached the agent with the consent of the principal. On the contrary, such entrusting is the necessary setting for the crime…. it is no defense to embezzlement that the victim trusted the culprit.”

35. Obstacles To Enforcing Elder’s Rights3. Litigation Costs Levitt v. Hankin, 93 Cal. App. 4th 544 (Cal. App. 2d Dist. 2001): Attorney fee award reductions were affirmed, based upon the modest size of estates, despite argument that higher award would encourage attorneys to take elder abuse cases.

36. ANECDOTAL MATERIALS • Donald Mayne, Minnesota: • Mr. Mayne appointed his daughter as POA • Daughter stole $60,000, then faced criminal charges of “theft by swindle” • Medicaid attempted to strip Mr. Mayner of his benefits

37. Donald Mayne, Minnesota (cont’d): • ALJ found “no convincing evidence” that the transfer was just an attempt to hide Mr. Mayne’s assets: “[i]t does not matter that his daughter, who was his attorney-in-fact, made the transfers against his will and outside his control.” • University of St. Thomas law students’ Elder Law Practice Group and Minnesota attorney general’s office became involved and Mr. Mayne’s benefits were restored.

38. ANECDOTAL MATERIALS FROM AUTHOR • Case #1: Exploitation By, And Criminal Judgment Against, Elder’s “Friend” • “Friend” took a frail, elderly widow into her home as a tenant and acted as caregiver. • Elder appointed “friend” as agent under power of attorney. • Caregiver stole about $166,000 from the elder.

39. ANECDOTAL MATERIALS FROM AUTHOR • Case #1: Exploitation By, And Criminal Judgment Against, Elder’s “Friend” (cont’d) • The caregiver was indicted, convicted and eventually sentenced to serve 7 years in prison. • Elder obtained civil judgment of $166,000 against the caregiver. • Elder, who is now residing in a nursing home, has been unable to recover any of the amount awarded against the caregiver.

40. ANECDOTAL MATERIALS FROM AUTHOR • Case #2: Exploitation By, And Civil Judgment Against, Elder’s Daughter • Author was appointed as counsel, and later as guardian ad litem, for an elderly woman. • Elder had lived with her adult daughter in the mother’s home before the daughter admitted mother into the local nursing home. • The nursing home sued the mother and the daughter after providing care for several years without receiving payment.

41. Case #2: Exploitation By Daughter (cont’d) • Daughter used POA to mortgage mother’s home, misappropriated most of the equity value. • On behalf of mother, filed counterclaim against daughter. • Judgment entered for nursing home against mother and daughter on the main claim. • Judgment entered for mother on cross-claim against daughter.

42. Anecdotal Materials: Impact Of Exploitation On Medicaid Eligibility • Medicaid applications filed for the victims in both cases. • Case 1 (Misappropriation by “Friend”): Medicaid application approved.

43. Anecdotal Materials: Impact Of Exploitation On Medicaid Eligibility (cont’d) • Case 2 (Misappropriation by Daughter): Medicaid application denied (failure to provide information about the stolen funds). • Author’s conclusion: the criminal conviction in Case 1 was a motivating factor behind Medicaid’s approval.

44. CASE LAW AND ADMINISTRATIVE DECISIONS: • Theories of Recovery in Financial Abuse Cases Generally • Civil and criminal actions. • Recoveries on behalf of the elder and on behalf of Medicaid. • Restitution awards ordered to be made directly from the perpetrator or from, for example, the company holding the surety bond for a wrongdoing guardian.

45. CASE LAW AND ADMINISTRATIVE DECISIONS: • Cases Deciding Medicaid Issues • Glastonbury Healthcare v. Esposito, 2008 WL 2797003 (Conn. Super. June 23, 2008): • Nursing home sued elder’s son (and POA) for loss of Medicaid benefits.

46. Glastonbury Healthcare v. Esposito, 2008 WL 2797003 (Conn. Super. June 23, 2008) (cont’): • Court held that son (1) failed to reduce mother’s assets as directed by Medicaid; (2) wrongly claimed that a $15,000 bank account was not mother’s asset; and (3) as father’s executor, failed to distribute income to mother pursuant to father’s Will.  • Court concluded that facility lost Medicaid payments that it would have received absent son’s actions, and found son liable for that loss.

47. A.H. v. DMAHS, 2008 WL 648922 (N.J. App. Div. Mar. 12, 2008): • Son (POA) applied for and obtained Medicaid for father. • Son then used POA to mortgage parents’ home, put portion in parents’ bank account and kept portion of proceeds. • Son applied for Medicaid for mother but did not disclose her interest in bank accounts.

48. A.H. v. DMAHS, 2008 WL 648922 (N.J. App. Div. Mar. 12, 2008) (cont’): • Failure to disclose mother’s accounts led to her incorrectly receiving Medicaid. • Medicaid notified son that parents’ benefits would terminate because of excess resources. • Holding: penalty period should be imposed for benefits paid to parents; son held personally liable for repayment.

49. A.H. v. DMAHS, 2008 WL 648922 (N.J. App. Div. Mar. 12, 2008) (cont’): • “[the son’s] active role in dealing with his parents’ assets, in applying for benefits, and in personally benefiting from those assets while, at the same time, ineligible benefits were provided for the benefit of his parents, more than amply triggered [the son’s] personal liability for the repayment.”

50. Probate of Marcus, 199 Conn. 524, 509 A.2d 1 (Conn. 1986): • Ward’s conservatrices (daughters) misappropriated ward’s entire estate. • Conservatrices then applied for Medicaid. • “Gifts” were disallowed by probate court. • Medicaid was then denied.